Bescom, Mescom indulge in illegal power trade

Power crisis in the State in March and April attributed to trading

The issue, which affects the interests of their own consumers, has raked up a new controversy as the trading done through middlemen reportedly violated all the norms. Sources say the power crisis in March and April could also be attributed to this trading.
Bescom and Mescom had indulged in power trading in late 2008 (July and September) with help of Pune-based Kalyani Power Development Private Limited (KPDPL).

Accordingly, the two companies executed a Letter of Intent (LoI) with KPDPL as an agent for the power exchange transaction with BSES Rajadhani and BSES Yamuna, the power distribution companies of New Delhi. This violated the Electricity Act, 2003, sources told Deccan Herald.

The Act says that the distribution company, being a deemed licensee, can get into a power trading transaction directly without approaching a power trader. “Even if it is presumed that a power trader was required, there are several government-owned companies which they could have gone to. But KPDPL, which they relied upon, is a recent entry incorporated in 2008,” said an source in the sector.

Interestingly, one of the most important terms of the LoI –– execution of a Bank Guarantee by Kalyani Power in favour of Escoms –– has been reportedly bypassed even for a transaction as huge as supply of 200 MW of power. According to the statistics from KPDPL, power was sold by Mescom from July 1, 2008. About 3.2 million units of power per day was supplied until July 26, 2008. Delhi had witnessed a severe power crisis during this period.

The Bescom trading began from September 1, 2008 with 0.75789 million kwhs and concluded on September 30.

Power barter
As per the LoI, a transaction called “power barter” is chalked out wherein, Karnataka Escoms will supply 200 MW of power to New Delhi and in return, BSES will have to supply back an excess of 5 units for every 100 units supplied.

However, no power has been supplied back to Karnataka either by Kalyani Power or by BSES as the Escoms did not insist on any Bank Guarantee from the trading company. Now, there is no way of ready recovery. “The Escoms should have directly signed an agreement with BSES, which was not done. The sole contact point for such huge transaction was the Pune-based company. Even the LoI executed with Kalyani was not culminated into a contract,” explained the source.

Bescom mum
Interestingly, Bescom is silent about the episode, while Mescom has brought the matter to the notice of Karnataka Electricity Regulatory Commission (KERC), though the right forum for this is the Central Electricity Regulatory Commission (CERC). “The most interesting aspect of this is that the BSES, the real benefactor is not even a party to it,” informed a power expert.

Another interesting factor is that the Pune-based KPDPL is owned by Kalyani Group of Companies, which also owns the Nandi Infrastructure Corridor Enterprises Limited (NICE).

A power expert raises some pertinent questions as to why  no tender or competitive bidding was called for and why no power purchase agreement was made. “When the State government claims that there is a power shortage and has paid more than Rs 2000 crore during the financial year 2008-09, how could the State sell 200 MW of power to New Delhi?  These questions need answers,” says the power expert in the City.

Section of the Electricity Act violated
When the illegal power trading was carried out by the two Escoms, the State had imposed Section 11 of the Electricity Act on the co-generation units to ensure that no power should be supplied to any other state. The State, which was facing severe deficit, was also waiting for power from Chattisgarh.
During March and April 2009, the deficit was about 500 megawatt.